Will artificial intelligence features drive iPhone sales to new heights? Probably not anytime soon, but that doesn’t mean Apple shares will collapse from the highs they’ve reached this year, as some have predicted.
Apple shares, which closed at a record price of $251.04 on Monday, have risen more than 50% since hitting lows of around $165 in April, when the company launched Apple Intelligence – the name for its phone-based AI service – with disappointing reviews. Overall, shares are up 35% this year, surpassing the S&P 500’s 28% gain, helping Apple reclaim its spot as the world’s most valuable company.
All this reflects that there is a lot of optimism around Apple, despite declining iPhone sales, which account for about half of the company’s revenue.
According to JPMorgan’s Samik Chatterjee, the optimism is justified. He believes AI revenues will increase with the expected launch of the iPhone 17 in 2025. He predicts sales of the product will rise from 230 million units in the company’s next fiscal year, which began this quarter, to 251 million phones in the next twelve months. months.
Even if that doesn’t work out, Chatterjee wrote in a note published Monday, there’s still a strong bull case for the stock. That story revolves around Apple’s services activities – think of elements such as technical support; content such as Apple Music, News and TV; and payment products such as Apple Pay and the company’s co-branded credit card. Earnings from this offering, Chatterjee claimed, should be more resilient than many investors expect.
It is unclear whether famed investor Warren Buffett shares Chatterjee’s perspective. The Oracle of Omaha made headlines this year when he cut his position in the company by more than two-thirds, sparking speculation about whether the shares have become unreasonably expensive. (It’s worth noting, however, that Buffett’s $74 billion stake in the company remains Berkshire Hathaway’s largest public holding.)
According to consensus estimates from S&P Capital IQ, Apple currently trades at about 34 times expected earnings for the next twelve months. That makes the stock equal to or more expensive than that of almost all of its fellow tech giants in the so-called Magnificent Seven – America’s largest companies by market capitalization – with the exception of Amazon (40 times) and Tesla (140 times).
Chatterjee currently has a $265 price target on the stock, which implies a price-to-earnings ratio of 27 based on his 2026 earnings estimates.
“We believe this multiple is justified as it is more in line with the average multiple at which the shares have traded in recent years; Although we see upside opportunities with a longer AI-led replacement cycle likely to amplify the gains many investors are willing to attribute,” he wrote.
